Best Gold ETFs in India 2025

Gold Exchange-Traded Funds (ETFs) have become a popular investment option in India. They offer a convenient and cost-effective way to invest in gold without the challenges of physical ownership. In this blog, we will understand gold ETFs, a few of the best gold ETFs in the market, and the advantages and disadvantages of investing in Gold ETFs.

Best Gold ETFs In India (3Y Annualised Returns)

An ETF is a basket of securities that includes stocks, bonds, and commodities. Like stocks, ETFs are traded on exchanges. The ETF tracks and benchmarks its performance against an underlying index, such as the Sensex or NIFTY.

A Gold exchange-traded fund in India is a fund that has holdings in gold bullion and gold futures. It is a passively managed fund. A gold ETF's primary purpose is to mirror the price movements of physical gold in the market. For example, if the price of gold increases by 1%, the value of the gold ETF should increase by 1% as well. This direct correlation makes it easy for you to understand how your investment performs.

When selecting the best gold ETFs, it's essential to consider several factors. These include three-year annualised returns, asset under management (AUM), and expense ratios. 

Here are some of the top-performing gold ETFs in India based on their three-year annualised returns and assets under management:

Overview of the Best Gold ETFs in India in 2025

• HDFC Gold ETF

HDFC Gold ETF has delivered impressive three-year annualised returns of 17.67% and manages assets worth ₹8,019.63 crores. The strong brand reputation of HDFC makes this a trusted option for many investors. It is currently trading at an NAV of ₹76.25, with a 52-week high of ₹77.30 and an expense ratio of 0.59%.

• Axis Gold ETF

Axis Gold ETF offers competitive returns with a moderate AUM, showing three-year annualised returns of 17.63%. The fund manages assets worth ₹1,303.5 crores. It is currently trading at an NAV of ₹71.98, with a 52-week high of ₹75.60 and an expense ratio of 0.56%.

• Birla Sun Life Gold ETF

Birla Sun Life Gold ETF provides high returns with a relatively smaller AUM, having posted three-year annualised returns of 17.54%. The fund manages assets worth ₹1,022.83 crores. It is currently trading at an NAV of ₹75.46, with a 52-week high of ₹81.00 and an expense ratio of 0.54%.

• Kotak Gold ETF

Kotak Gold ETF combines strong returns with a large AUM, having delivered three-year annualised returns of 17.40%. The fund manages substantial assets worth ₹16,975.80 crores. It is currently trading at an NAV of ₹72.19, with a 52-week high of ₹75.55 and an expense ratio of 0.55%.

• Nippon India ETF Gold BeES

Known for its large AUM and stability, Nippon India ETF Gold BeES has shown three-year annualised returns of 17.40%. The fund manages assets worth ₹16,975.80 crores, making it one of the largest gold ETFs in India. It's a popular choice among investors seeking liquidity and diversification. It is currently trading at an NAV of ₹71.10, with a 52-week high of ₹73.70 and an expense ratio of 0.82%.

Advantages Of Gold ETFs

There are several advantages of investing in gold ETFs:

Convenience: Gold ETFs are traded on stock exchanges like stocks. This allows for easy buying and selling through your demat account. You don't need to visit a jeweler or worry about storage.

Cost-Effective: They eliminate the need for physical storage and making charges associated with jewellery. With ETFs, you pay only for the gold value plus a small expense ratio. This makes your investment more efficient.

Diversification: Gold ETFs help diversify your portfolio. The price of gold and stocks are inversely correlated, which means that when the prices of stocks and bonds fall, the price of gold goes up. This protection is valuable during market downturns.

Transparency: The price of gold ETF units directly tracks the price of gold. This ensures transparency in valuation.

Liquidity: Investors can trade gold ETFs throughout the trading day. This allows you to convert your investment to cash quickly. You don't have to worry about finding a buyer as you would with physical gold.

Disadvantages Of Gold ETFs

While gold ETFs offer many advantages, there are some drawbacks to consider before investing:

Taxation: Currently, gold ETFs in India are charged a Long-term Capital Gain of 12.5% without indexation benefits for a holding period of beyond 12 months. Short-term capital gains are charged at your income slab. You should factor this into your expected returns when planning your investment strategy.

Dependence On Gold Prices: The performance of gold ETFs is directly linked to global gold prices which are in turn determined by economic factors like the gold demand by central banks, geopolitical issues, supply and demand of gold, etc.
Need to have a Demat account for investment: Unlike mutual funds, investment in ETFs is possible only through a Demat account. So, it might not suit investors who do not want to go in for a separate demat account just for investing in gold. 

Tracking Errors:  ETFs are designed to replicate the performance of their underlying assets. However, due to factors such as transaction costs, management fees, and cash holdings, there may be slight discrepancies between the ETF’s returns and those of the assets it tracks. These deviations are known as tracking errors. If the tracking error exceeds an acceptable threshold, the ETF’s returns may significantly diverge from the asset’s actual performance.

Benefits Of Investing In Gold ETFs

Below are some specific benefits of gold ETFs in your investment portfolio:

Hedge Against Inflation: Many investors consider gold as a protective asset during periods of rising inflation. When the value of currency decreases, gold prices typically rise. This makes gold ETF investment in India a valuable addition to protect your wealth from inflation. Your purchasing power can be preserved even as prices increase.

Portfolio Diversification: Gold ETFs help reduce portfolio risk by adding a non-correlated asset. Gold prices are inversely correlated to stocks and bonds. This diversification is crucial for long-term investment success. You can achieve more stable returns over time with a diversified portfolio.

Easy Investment Process: They offer a simple way to invest in gold without the need for physical storage. You can start with a small amount and increase your investment over time. The minimum investment is just one unit of the ETF.

Systematic Investment Option: Many brokers and platforms allow you to set up systematic investment plans (SIPs) for gold ETFs. This helps you build your gold holdings gradually. You can invest a fixed amount regularly, regardless of market conditions. This approach helps you average your purchase cost over time.

Conclusion

Financial advisors advise a 5-10% allocation of gold in any portfolio to meet the needs of diversification. Gold ETFs come across as one of the easiest ways to invest in gold as they can be bought and sold over the stock exchanges throughout the day. It doesn’t pose any challenges on the storage front and comes at a low expense ratio. However, as with any investment, gold comes with its own set of risks that any investor should be aware of.